Sunday, February 26, 2012

Berkshire analysis

Analysis of Berkshire report and results at:

Sunday, February 12, 2012

Romney kids net worth

Interesting story from cnn:

And interesting discussion:

Saturday, January 28, 2012

Saturday, January 21, 2012

Infosys (INFY) Analysis

Infosys (INFY) is an Indian IT services company that has world wide presence. It gets most of its business from north america (~60%) with significant revenue from Europe and a very small incremental revenue (~2%) from India.

In the last year, the return (excluding dividends) has been -25% for Infosys and overall return for the past five years has been ~-7% excluding dividends.

Let us see if this is a business worth investing in given that it is the premier IT company in India. Revenues per share have grown from 78 cents/share to $12.78/share from 2000 - 2011. Earnings have grown from 24 cents/share in 2000 to $3/share in 2011.

So, it is not the company fundamentals that have caused stagnation in the stock price. It is the unreasonable expectations of the past that have made the stock price a lot higher than it should have been given the fundamentals.

So, is infosys a good investment now? Infosys faces many challenges moving forward - especially an uncertain 2012 with economic turmoil in Europe. The company can't be termed cheap with respect to cash flow or earnings in the U.S market. There are many companies that are cheaper than Infosys in the U.S market at the moment. However, Infosys is a well run company ( no significant dilution to shareholders from 2006 onwards ) with a strong balance sheet and no debt. It should do well over the long haul.

Google Earning Analysis

I went through google earnings through this table. I like to do my own analysis despite what the analysts say and come to my own conclusions.

After going through this table, the operating income grew by 11% year over year for the full year despite revenue going up 29%. It is still pretty decent but we aren't seeing the heady growth in income we saw before. Google is executing well with mobile (700K phones activated everyday), display ads (5 billion business), youtube and other businesses and will be a force to contend with for years to come. The stock valuation is a different story and it is not cheap by any means. This is keeping in mind that Google is about to buy Motorola Mobility which likely will change the MO relationship in a significant way for Android.

Since we are talking about business as a whole, let us look at the earning call transcript. From Larry Page:

Each of improved execution and velocity is focus. There are so many opportunities for Google today. But to make a real impact in the world, we need to make hard choices about where to focus our efforts.
Since we last spoke, we've announced that we're closing 12 of our products, including Buzz, Knol and Friend Connect, integrating a whole bunch of others into features of existing products. This means that we can double down on the really big bets we had made like Android, Chrome, Gmail, Display and YouTube. And I'm pleased to say this big bets are really paying off. We're seeing extraordinary velocity, the kind of velocity we only we can dream about. Android is, quite simply, mind-boggling. 700,000 phones are lit up every day. And I'm pleased to announce 250 million Android devices in total, up 50 million since our last announcement just in November. In just 2 days over the holiday weekend, 3.7 million Androids were activated. And today, we're announcing over 11 billion downloads from Android markets. Wow. Ice Cream Sandwich, which is the new Android release in October, is by far our best build yet. And our exciting new phones. I simply love my Galaxy Nexus. Superfast, it's great for photos, has an amazing 720p screen.
Chrome is on fire, too. It's a wonderful example of kind of beautifully simple, intuitive experience that really improves users' lives. People thought we were crazy. Who wants another browser? It turns out a lot of people wanted to get to web quickly and securely, and we've got an amazing, fast-growing fan base all around the world.
From the start, Gmail had security, accessibility. Get all your emails from anywhere on any device. An insane storage. That made it a winner with consumers, businesses and education. From an internal beta project 8 years ago, I'm proud to tell you today that Google Gmail now has more than 350 million active users, and it's growing rapidly. That [indiscernible] said, our merging high-use project -- products can generate huge new businesses for Google in the long run, just like Search, and we have a ton of experience monetizing those old [ph] products over time. Take Display. We brought the science of search to the art of the Display, creating a business that our latest figures show has now reached an annualized run rate of over $5 billion.
I have some exciting new numbers also for the DoubleClick Ad Exchange, spending is up over 130% year-on-year, and the number of buyers and sellers have both more than doubled over the same period. I'm very pleased with the advertising on YouTube. TrueView gives users much more choice over what they watch, and advertisers only pay when someone watches their ad.
It's not just in advertising that we're doing well. Enterprise is doing great with over 5,000 new customers signing up every day. In fact, last week, we signed our biggest ever deal, about 110,000 users at BBDA, one of the world's leading banks. All of our experience says that well-run technology businesses with tremendous consumer research, make a lot of money over the long term.

MSFT - the stock popped, should one buy more or sell?

Microsoft reported its earnings this week and the stock popped as it beat analyst estimates. Let us look at the business as a whole to see if one should buy more or less?

The company's operating income for the first six months of the year decreased by ~1% and declined by ~2% in the December quarter. It is not huge but shows the business dynamics as a whole. The slow down is mostly because of the windows client slow down which will eventually show up in other businesses. However, the net income was up because of other income and a more favorable income tax rate. It didnt hurt that the number of shares outstanding declined by some 2.1%.

The other measure one must watch out for is the growth in share holder equity. The company pays out nearly 7 billion in dividends every year from its cash flows. The shareholder equity increased by about 7 billion dollars for the first six months of the year compared to June 2011. All the increase is from goodwill from the Skype purchase.  Since Skype doesn't add to the bottom line yet, this increase in share holder equity will have to wait out to see how it does over time.

The company has prodigious cash flows even though it is somewhat stagnant/slightly declining year over year. The company is impacted by windows client decline but has had increases in server & tools, microsoft business division (where growth is moderating to low single digits) and declining losses in the search business. The entertainment and devices division is showing a larger decline in profits this year probably because of the acquisition of Skype.

With operating income of 27 billion in 2011 that is slightly declining year over year and not much in capex other than people that can be disposed of, a case can be made that Microsoft is under valued. However, a declining business has its own risks and there are many under valued investments available in today's market and will continue to be available. Microsoft provides a good yield that should remain reliable with increasing stock buy back even with declining cash flows. Microsoft's businesses remain solid but their hold on the market may be declining as customers flock to other form factors such as the tablet where Microsoft has been lagging.